Drug patents

Under attack

Why are drug patents now coming under legal attack?

AT FIRST blush, the Plavix affair appears to be an astonishing victory for Apotex, a cheeky Canadian drugs firm that launched a generic version of the world's second-bestselling drug. For a few weeks in August the generic version captured nearly three-quarters of the American market for the $6 billion-a-year drug—until Sanofi-Aventis and Bristol-Myers Squibb, the makers of Plavix, asked a judge to halt sales, which he did on August 31st.

Look closer, though, and it becomes clear that Apotex will be a winner only if it defeats Sanofi's patents on Plavix in a case that starts in January. Regardless of the outcome, the case raises an important legal question: how can a firm like Apotex bring a generic drug to market when others own a perfectly valid patent for it? The answer is that the potential prize is simply so large these days that the reward outweighs the risk of legal defeat. The multi-billion dollar sales of today's blockbuster drugs have invited greater legal scrutiny of patents and encouraged generics firms to find ways to innovate around them.

The result is a relentless legal attack on branded drugs. Eli Lilly has seen its patents on Prozac, Evista and Zyprexa, three of its biggest-selling drugs, challenged by generics firms. Pfizer faces frequent patent challenges on Lipitor, the cholesterol-reducing remedy that is the world's bestselling drug. Dozens of other patent challenges are pending.

Curiously, rather than using the law to defend their patents, big firms often settle out of court. Sanofi and Bristol-Myers Squibb made just such a deal with Apotex, but it was deemed to be illegal. Shire, a British firm that makes a drug to combat attention-deficit disorder, got Barr Laboratories to agree in August to delay its generic launch until 2009.

But why would a firm with a legal patent strike such a deal? One reason could be that some drugs giants regard settlements as a way to bribe a generics firm to delay its introduction of a cut-price product. American antitrust officials worry this is to the detriment of the consumer. Another explanation is that the cost and legal uncertainty associated with patent trials are simply too great. Daniel Glazer of Shearman and Sterling, a big law firm, argues that even a firm convinced of the integrity of its patents may well settle “to avoid the all-or-nothing scenario”.

But there is a less charitable explanation. The big firm may know that its patent was mistakenly awarded, perhaps because the purported breakthrough was too minor or obvious. In Barr's ongoing case against Eli Lilly's Evista, the generic firm argues that a prior patent held by the University of Pennsylvania invalidates Lilly's claims. Kathleen Jaeger of America's Generic Pharmaceutical Association adds that branded firms try to extend their lucrative monopolies by filing less rigorous secondary patents designed “to block generics”. David Balto, a former official at America's Federal Trade Commission, says, “Branded pharmaceutical firms have been stretching the limits of what deserves a patent, and the courts are just catching up.”